
Gass /f S 1 1 9 
Book_ 



\ 



{Reprinted Dec. 10, 1S91, from Proc. Amer. Philos. Sac., Vol. xxix.) 



CAREY AND TWO OF HIS RECENT CRITICS, 

EUGEN V. BOHM-BAWERK AND ALFRED MARSHALL. 



By HENRY CAREY BAIRD. 



{Read before the American Philosophical Society, November 20, 1891.) 

Permit nie, this evening, to ask your attention to a brief examination 
of the recent criticisms of Carey by two economists — the one an Austrian, 
the other an Englishman. Although these two writers treat the economic 
problem, each from an entirely different standpoint, one is as remote from 
an appreciation of the truth as the other; and further, neither recognizing 
what constitutes the great fundamental principle in Carey's system, they 
have both left his position unassailed, as indeed it is unassailable. The 
Austrian is Bohm-Bawerk, Honorary Professor of Political Economy at 
the University of Vienna; the Englishman, Alfred Marshall, Professor of 
Political Economy at the University of Cambridge. 

Prof. Bohm-Bawerk has published two ponderous treatises, the first 
intended to be destructive of other men's reasonings and theories, and is 
entitled, "Capital and Interest, a Critical History of Economical Theory;" 
the second, designed to be constructive of theories of his own, is entitled, 
" The Positive Theory of Capital" — whatever a "positive theory" may 
mean, seeing that man's vision, mental as well as ocular, being limited, 
and thus short of the capacity to take in the whole situation, he can have 
no absolute or positive knowledge — nothing more than his poor faculties 
permit of. Mr. Bohm-Bawerk's first book, as translated by Prof. Smart 
of Glasgow, makes of text, 8vo, 428 pages; the second, as translated, 8vo, 
426 pages, while a distinguished professor of political economy, who 
thinks well of the author's labors, has recently assured me that the mar- 
row of these 854 pages might have been put into forty pages. Such is the 
thoroughness of this Austrian savant that he inflicts upon the student of 
economics twenty-one times as many words as the ideas he possesses are 
worthy of in the presentation. As for myself, I can say that I have care- 
fully and critically read the whole of these dreary pages— dreary because 
of an ever-recurring sense of the unsoundness of the author's premises, 
as well as of his conclusions. 

The net result of Dr. Bohm-Bawerk's "Capital and Interest," wherein 
he charges Carey, in what he says of interest, of being guilty of " a tissue 
of incredibly clumsy and wanton mistakes," is that "Present goods possess 

.' (2) 






*$ 



A 



a greater value than future goods ;" that a " foa/i e's a real exchange of pres- 
ent goods against future goods;" and "Present goods possess an agio in 
future goods. This agio is interest." 

Such is the actual product of 428 pages of the most complex, confusing, 
narrow, hair-splitting, and arrogant criticism, criticism, too, by a man 
who has himself built up a superstructure which rests upon a fallacy. 
This fallacy consists in the fact that the writer has included in and treated 
under "Interest " things that are not interest at all. Interest is the com- 
pensation paid for the use of the instrument called money, and its substi- 
tute, credit, alwa} r s expressed in a money of account, and for them alone. 

This instrument, money, is the great instrument of association — that one 
thing, the possession of which, with its quality of universal acceptability, 
in highly organized — civilized — society, commands all other things to which 
we attach the idea of value. To talk of the rent of a house, a farm, or a 
garden, the freight or passage paid to a railroad, or a steamship, or a 
steamboat company, or proprietor, or the porterage in a cart, or a wheel- 
barrow, as interest, is to add a new and most vicious clement of confusion 
to that despair of thoughtful men, that fruitful parent of misery to man- 
kind, the "Dismal Science." The very word agio, which Dr. Bohm- 
Bawerk would apply to all manner of goods, wares and merchandise, had 
its origin with reference to a money of account, and to this hour it can be 
applied to or qualify no manner or form of thing not expressed in a money 
of account. 

Farther, Dr. Bohm-Bawerk has jumbled up the profit that a capitalist 
can make out of his own business ventures over and above the profit im- 
agined to be properly due to his own time and labor, with the interest 
problem. Thus does he further and hopelessly bemuddle the subject of 
interest. He calls this profit, which is not interest at all, interest, and which 
it is impossible to separate from the results of the personal exertions, 
sagacity, experience, and risks of the capitalist — "natural interest." 
Where, in nature, will he find interest, where trade, money, credit, houses, 
ships, railroads, tools, wagons, wheelbarrows, textile fabrics — where, I 
would ask, without the application of human labor, any single commodity 
to which we attach the idea of value? Are not civilized society and all 
its appliances for forwarding trade, commerce, production and consump- 
tion, purely the work of man, and hence artificial? Is not this natural 
interest a collocation without meaning ? Is not this doctrine of Dr. Bohm- 
Bawerk's, to use his own words, as applied to Carey, " one of those theo- 
ries which cast discredit, not only on their authors, but on the science that 
lets itself be seduced into credulous acceptance of them, not so much that 
it errs, as for the unpardonably blundering way in which it errs?" For 
one, not only do I think that it is so, but to me it is a source of wonder 
and amazement, that the perpetrator of such blundering can criticise others 
in the severe and arrogant terms in which Dr. Bohm-Bawerk has done. 

But what is to be thought of his treatment of Carey ? Why, that it is 
simply infamous, for the reason that the necessary preliminary to refuting 

V 



and denouncing him as guilty of a "tissue of incredibly clumsy and 
wanton mistakes" has been his misrepresentation. In order to refute 
him, he has been forced to attempt to make it appear that Carey was 
guilty of the stupidity of treating distribution, as Dr. Bohm-Bawerk has 
done, as interest, not distribution. What Carey himself calls "the law of 
distribution," he calls "Carey's interest theory." After quoting what 
Carey distinctly states regarding distribution, and which he calls such, he 
comments as follows: "On these preliminary facts, then, Carey builds his 
great law of interest; that, with advancing economical civilization, the 
rate of profit on capital— that is, the rate of interest— falls, while the abso- 
lute quantity of profit rises" (the interjected words, "that is, the rate of 
interest," being Dr. Bohm-Bawerk's, not Carey's). Carey distinctly and 
emphatically says: "Interest is the compensation paid for the use of the in- 
strument called money, and for that alone." And again: "When a man 
negotiates a loan, he obtains money for which he pays interest; when he 
borrows the use of a house, be pays rent; when he hires a ship he pays 
freight. ' ' 

This dictum of Carey's is not merely clear and to the point, but it is in 
accordance with the common understanding of mankind. To change it 
as Dr. Bohm-Bawerk has attempted to do, is to bemuddle and confuse the 
subject. Before he and his translator obtain the right to arraign Carey as 
"a confused and blundering writer," it is incumbent on them both to 
show that his definition is wrong, and that Dr. Bohm-Bawerk's definition 
is correct, and the only correct one. Until they have done so, their de- 
nunciations obviously prove their own incapacity properly to criticise a 
man of Carey's originality, lucidity, power, and far-reaching influence 
upon mankind. 

Of the numerous economists whose doctrines Dr. Bohm-Bawerk has 
attempted to criticise, none has he denounced in terms so opprobrious as 
those applied to Carey and his distinguished disciple, E. Peshine Smith, 
and yet of all these men, the philosophy of none but Carey and Smith is 
capable of explaining the real cause of interest, or of clearing up the con- 
fusion into which Dr. Bohm-Bawerk has become involved regarding 
value. 

Interest owes its existence to precisely the same cause and conditions 
as does money — the necessity under which man stands for association and 
combination with his fellow-men. But for this necessity there would be 
no interest, no money, indeed no political economy. Any system, or 
pretended system, of political economy which is not grounded on this 
great principle of association, this overmastering condition of man's 
nature, is false and misleading, a delusion and a snare — a system of con- 
fusion leading not only to further confusion, but to the wreck of the 
hopes, the rights, the civilization of mankind. The sj'stem of Dr. Bohm- 
Bawerk does not even remotely recognize it; he has not even the faintest 
glimmer of it, although all political economy is and must be concerned 
about it. He has dropped out of his system the great fundamental law, 



the great dominating fact as to the existence of man in society. His 
system is therefore of necessity not only useless, but worse than use- 
less. 

The second treatise of Dr. Bohm-Bawerk, "The Positive Theory of 
Capital," gives us, as a net result, the old and exploded wage- fund theory 
of the economists, with, as an annex and as a result of his interest theory 
of present goods possessing an agio in future goods, the effects of extension 
of processes of production and the number of producers to be provided for 
during all these imaginary processes — extended or non-extended, though 
they be. In fact, he has added to, not decreased, the complication which 
arose out of the unsound and even absurd wage-fund theory, involving, 
as it did, a fixed "national subsistence fund." 

Attempting to bolster up the theory of saving as a source of capital, Dr. 
Bohm-Bawerk has no real conception of the actual source of capital. His 
whole theory is antagonistic to the truth that wealth consists in the power 
of man to obtain mastery over nature; and that capital is the instrument 
by means of which that mastery is acquired; and further, that capital ac- 
cumulates in the exact ratio that consumption follows production, and 
that matter takes upon itself new and higher forms — what we term con- 
sumption and production being mere transformation of substance; in 
other words, the more continuous and rapid the motion of society, the 
greater the power to accumulate capital and to acquire wealth. 

An entire "book" is devoted to the discussion of "Price," in which 
even a definition of that vital word is wanting, the evidence being therein 
presented, in abundance, that the author is quite unaware of the fact that 
price is the expression of the power of a commodity to command money 
in exchange, and is always expressed in a money of account, 

While two entire volumes are filled with discussion looking towards the 
effort to establish the cause of interest and of the rate of interest, Dr. 
Bohm-Bawerk has not even the most crude conception of why it is that 
people are obliged to borrow money or credit, or goods, or rent houses, or 
factories, or why one man buys and another man sells labor power. If 
he had recognized association with his fellow-men as the most dominating 
necessity of man's nature, and that money, with its qualities of universal 
acceptability, and of almost perfect divisibility and aggregation, was the 
necessary instrument of association, he would not have inflicted upon 
mankind such a tissue of learned fallacy in reference to "present goods " 
and " future goods," labor wages and the wage-fund theory. Above and 
beyond all, he would not have made those fundamental errors as to inter- 
est, which is paid only for the use of money or credit expressed in a 
money of account, but which he has jumbled up with the hire of all sorts 
and kinds of goods, wares and merchandise. He does not even know 
why "present goods" possess what he calls an agio in "future goods," 
i. e., because of the necessity under which man stands for association and 
combination with his fellow-men. 



6 



Marshall. 

Under the title of "Principles of Economics," Prof. Marshall, of 
the University of Cambridge, has published the first volume, 754 pages, of 
a treatise in which no great broad principle is presented, in which no end 
of petty details are given, and in which not a single clear and valuable 
analysis of economic phenomena is to be found; and in which an entire 
absence of the true capacity for analysis is shown. The profundity of 
Prof. Marshall may be judged from the fact that he says: "It makes indeed 
little real difference to the life of a family whether its yearly income is 
£1000 or £5000." No one but an economist could enunciate such non- 
sense, and still retain his position as an authority in a high department of 
knowledge. 

His book, largely accepting the doctrines of Ricardo, is full of apologies 
for him, and for his inaccuracy of statement. For instance, he says: 

" His exposition is as confused as his thought is profound. He uses 
words in artificial senses which he does not explain, and to which he does 
not adhere, and he changes from one hypothesis to another without giv- 
ing notice. If, then, we desire to understand him, we must interpret him 
generously, more generously than he himself interpreted Adam Smith. 
When his words are ambiguous, we must give that interpretation which 
other passages in his writings indicate that he would have wished us to 
give them. " 

It is quite proper that a teacher who can talk in this style should have 
no difficulty in deciding that Carey and others who have refuted Ricardo 
do not understand him. After myself reading "Ricardo" more than 
thirty years ago, I told Mr. Carey that I could not understand what he 
was driving at. His reply was, "Ricardo did not himself understand." 
Nor do I think he did. Confusion in language involves confusion not 
merely in argument, but in thought ; and in no other department of 
knowledge but that of political economy, would it be possible for one who 
needs such apologies, as those made for Ricardo by Prof. Marshall, to 
become the founder of a distinct school. 

The blunders which Mr. Marshall has made with reference to Carey 
and Frederick List, and especially as to the indebtedness of the former to 
the latter, are most remarkable. 

For instance, he says Carey was born in Ireland, when, had he taken 
the least trouble to examine any biographical notice of him, he would, at 
a glance, have seen that he was born in Philadelphia. Then he asserts 
that List's "Outlines of a New System of Political Economy," a tract 
published in Philadelphia, 1827, and its wide circulation were "the be- 
ginning of his fame, as it was of the systematic advocacy of protectionist 
doctrines in America," whereas this movement was commenced in 1819, 
and Mathew Carey was one of the originators of it ; and three years be- 
fore the appearance of List's tract, or in 1824, the first really protective 
tariff enacted in the United States was passed. 



Then he says that this publication of List's was made ten years before 
the publication of Carey's first important work, his "Principles of Politi- 
cal Economy, " and adds, " Carey owes many of his best thoughts on 
protection to List." 

Now, Carey's attention to economic subjects commenced in 1835, when 
he published his "first important work," the "Essay on the Rate of 
Wages," and there is not a particle of evidence that he ever read the in- 
significant little tract of Frederick List. If he ever did he wholly failed 
to profit by it, as in all of his earlier books and papers he advocated the 
doctrine of laissez nous faire, never having publicly declared his adhesion 
to protection until the publication of "The Past, the Present, and the 
Future " (1848). Nevertheless, in each of his early books will be found 
the germs of those vital and far-reaching principles which he so grandly 
developed in his "Principles of Social Science," his progress from 1835 
to 1860, and even to 1875, having been steadily onward. By the benefi- 
cent practical working of the tariff of 1842, he was, in 1844, induced by 
the logic of events to range himself on the side of protection as a necessary 
national policy. But it was not until 1847 that he was able to reconcile it 
to economic theory. 

In 1847, when he had outlined his law of the occupation of the earth, 
which has completely overthrown the basis upon which rested Ricardo's 
theory of rent, he readily emerged from the last vestiges of a belief in so 
absurd a theory applied to an artificial society as laissez nous faire. Lying 
in bed one morning, picturing to himself the settlers on the sides of the 
hills, moving down into the valleys and approaching each other, as wealth, 
power and civilization grew, he realized the vital importance of bringing 
the consumer to the side of the producer, and, as he said to me, " I jumped 
out of bed, and, dressing myself, was a protectionist from that hour." 

The fact is Carey, not having studied German until 1856, List's "Na- 
tional System of Political Economy," published in Germany in 1841, was 
to him a sealed book until 1851, when a French translation by Richelot 
appeared in Paris. Carey's copy of this book in the Library of the Uni- 
versity of Pennsylvania, with his pencil marks in it, showing passages 
which he considered striking, clearly proves that he made but little use 
of it. 

But the question of Carey's position as a social philosopher is not to be 
determined by whether or not he picked out from some other investigator 
one idea here or another there, but by his philosophy as a whole. His 
great merit does not consist in the fact that he has demonstrated that asso- 
ciation and combination with his fellow-men is the greatest need of man, 
or that in the utilization of labor power — the most perishable of all com- 
modities — is to be found the measure of the growth of a people in wealth, 
power and civilization ; or that money, the instrument of association, by 
giving utility to billions of millions of minutes, which without it would be 
wasted, acts as a great saving fund for labor ; or that a necessary condition 
of advance in civilization is that man passes from the use of poor tools, in- 



8 

eluding poor lauds, to the use of good tools, including good lands ; or that 
value is the measure of the power of nature over man, and is to be found 
iii the cost of reproduction, while utility is the measure of man's power 
over nature ; or that, with the development of this last-named power, dis- 
tribution takes place under a law by virtue of which to labor goes a large 
proportion of a larger yield-freedom thus growing with the growth of 
wealth and civilization. 

It is not by reason of the clear demonstration of any one of these great 
truths, or of all of them, but of their demonstration plus the interlocking 
and the interweaving of these vital truths into one great and harmonious 
whole. Thus and thus only is it that he has presented a system of social 
philosophy deeper and broader than that of any other economist from the 
days of Plato and Aristotle down to our own time. By this touch-stone 
—fundamental truths with their relations to each other, worked out into 
a complete system-is it .that Carey is to be judged, and judged rightly 
and justly, and not by mere verbal criticism, or by an attempt to prove 
that an idea here or another one there was previously promulgated by 
some other teacher. 

A great admirer of Frederick List, for what he had done in building up 
the German Empire— a work without which Bismarck, Von Moltke, and 
William I would never have been heard of in history— Carey had but a 
poor opinion of List's "National System of Political Economy," for the 
very good reason that it lacked just what he had aimed to present in his 
own books, and what are absent in Prof. Marshall's volume, broad, deep 
and enduring fundamental principles, interlocked and interwoven into 
one grand and harmonious whole, like Carey's own great and noble 
"Principles of Social Science." Indeed, no such voluminous writer on 
social subjects as Carey has ever lived and written who has paid so little 
heed to the writings of other economists. His'own economic and statisti- 
cal library, now in the Library of the University of Pennsylvania, will 
bear me out in this statement. Colwell collected the writings of political 
economists ; Carey collected those of travelers, historians, statisticians and 
scientists ; and to these he went for the material out of which to demon- 
strate those great principles which will ever bear his honored name. 

How far Carey has been successful in impressing his philosophy upon 
the people of the United States, and upon the national policy, is well de- 
picted by a recent and far from friendly critic as follows: " Measured by 
results," says Prof. Levermore, "the Carey school, and not its opponent, 
has achieved success in the United States. For thirty years, the stone 
which the builders rejected has been the head of the corner. Carey and 
his friends never captured our colleges; but, for a generation, they had 
dominated five-sevenths of the newspaper offices, a pulpit far more 
influential than the professorial chair. The arguments to which Carey 
gave form and eloquence are in the mouths of more than half the business 
men and farmers of our country; and, in the last Presidential campaign, 
the Republican party reaffirmed the extremest principles of the Carey 



9 

school, including even the rancor towards England, with a violence and 
absoluteness that would probably have surprised Carey himself " ("Po- 
litical Science Quarterly," Dec, 1890, pp. 572, 573). 

The reason for this is not far to seek. Carey dealt in broad and endur- 
ing principles so interlocked and intertwined that any man of ordinary 
intellect, once captured by them, might ever after during his life bid 
adieu to the hope of freedom from their intellectual domination. 

Nihil est veritatis luce dulcius. Indeed, nothing is sweeter, nothing 
more delightful, than the light of truth ; and Carey has given to mankind 
a great body of truth, instinct with life and being, an organic whole 
demonstrating those principles which govern the well-being, the happi- 
ness and the civilization of the human race. The destruction of the 
foundations of this system demand men of greater power than Eugen V. 
Bohm-Bawerk and Alfred Marshall. They have not even made a lodg- 
ment in the outworks. In the citadel all is calm and serene, without 
apprehension of successful attack by such incompetent leaders — leaders 
who lack at once a knowledge of even the elementary principles of eco- 
nomic truth, and the power to group and place in proper relation to each 
other those things which they do teach, if, indeed, their theories have any 
connected relations one to another. If they have such relations, these 
gentlemen have failed to show them. 



